Audit D.C. Notes: NYT Does Well at (Trade) School; WaPo on Earmarks, Squeezed in Ypsilanti, Etc.

The New York Times continues its excellent series on “The New Poor” with a look at the for-profit colleges and trade schools that have seen enrollment—and profits—soar during the recession.

But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their degree programs, selling young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty. And the schools are harvesting growing federal student aid dollars, including Pell grants awarded to low-income students.

The Times paints powerful portraits of graduates of these programs who don’t land the jobs they were promised, and are struggling to pay off their debts.

“I’ve got $30,000 in student loans, and I really don’t have much to show for it,” he said. “It’s really frustrating when you’re trying to better yourself and you wind up back at Square One.”

But there’s a big public policy issue here as well. The Obama administration is “toughening rules that restrict institutions that receive federal student aid from paying their admissions recruiters on the basis of enrollment numbers.” The administration also wants to tighten rules that require vocational schools that get federal aid money to actually prepare students for “gainful employment.” But the for-profit education industry is lobbying hard to keep the rules loose.

Well done to the Times for showing what’s at stake.

—Earmarks got a lot of attention last week, when House Democrats said they would ban those that go to private companies and Republicans tried to go one better, proposing a complete moratorium, even for non-profit recipients like universities. But The Washington Post smartly follows up on all the political puffery with some sober assessment.

Perhaps not surprisingly, curbing spending this way is harder than it sounds. Only a small slice of earmarks would be covered by the Democrats’ proposal and private firms could probably work with nonprofits to get around it.

Moreover, neither the Democrats’ ban nor the Republicans’ proposal would cover much larger, congressionally directed grants and contracts to major federal contractors, worth $5.9 billion in the 2010 appropriations bills. That is because lawmakers narrowly defined what constitutes an earmark to include only entities that did not compete for funds.

Like I said, perhaps this isn’t surprising. But surely worth following up.

—The Journal makes a worthwhile trip to Ypsilanti, Mich., to show how the lending squeeze is hitting small businesses and slowing the recovery. We meet two businessmen, one who already has a loan, and one who hopes to get one.

Both are customers of the same community bank, the Bank of Ann Arbor. Mr. Haeussler is struggling to repay $8.3 million he and a partner borrowed to build a residential community in nearby Saline, Mich. In this economic environment, the bank doesn’t want to take a chance on what it sees as a risky new loan to Mr. Harrison.

—Bicycling and recycling in Shanghai is the subject of a fascinating audio slideshow from the FT. As my former colleague, Patti Waldmeir, explains, the same naked capitalism that wreaked havoc on China’s environment is now being tapped to clean up the mess. She introduces us to the country’s “rubbish entrepreneurs,” out in force and trying to turn waste into profit.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Holly Yeager is CJR's Peterson Fellow, covering fiscal and economic policy. She is based in Washington and reachable at holly.yeager@gmail.com.

Don't Miss

In June 2003, the San Francisco company Linden Labs launched a Massively Multiplayer Online Role Playing Game called Second Life. It quickly grew to over a million users, and has become a touchstone for the potential social adoption...